Financial Market Review for April 06, 2018 Economic data released through the Asian session this morning was limited to Japan’s February household spending. It was another disappointment for Prime Minister Abe, who has been looking to drive domestic consumption to provide support to economic growth and inflation and it comes at a particularly poignant time, with China and the U.S are in the midst of a trade spat that could deteriorate rapidly, Japan’s economic dependence on trade putting its economic outlook at risk. Household spending fell by 1.5%, month-on-month, which was far greater than a forecasted 0.6% fall, following January’s 2.7% rise, while year-on-year, spending fell by 0.9% following January’s 2%, falling short of a forecasted 0.3% increase. The fall was attributed to a 16.6% fall on education spending and a 13.2% slide in spending on housing, with only spending on transportation & communication (+.5%) and on fuel, light & water charges (5.1%) softening the blow. The Japanese Yen moved from ¥107.081 to ¥107.095 upon release of the figures, which saw the biggest fall since April of last year’s 1.4% decline, as the Japanese government now looks to the spring shunto, with the Japanese Prime Minister having lobbied for 3% wage increases in a bid to drive household spending. At the time of writing, the Japanese Yen was up 0.06% to ¥107.33, with the markets considering Trump’s latest bid to add tariffs on an additional $100bn of Chinese goods imported into the U.S, the move coming in response to China’s particularly aggressive announcement on Wednesday. Since the Chinese government’s announcement on Wednesday of tariffs on $50bn worth of 106 U.S goods including soybeans, auto and aircraft, Beijing has also filed a complaint with the World Trade Organization. Elsewhere, the Kiwi Dollar and the Aussie Dollar continued to slide, following losses on Thursday, with the U.S administration’s response to China’s retaliation lifting the prospects of a trade war that could ultimately impact both economies, weighing on oil and metals in the early part of the day. In the equity markets, the Nikkei and ASX200 had choppy starts to the day, the pair managing to move into positive territory at the time of writing, the Nikkei up 0.33%, with the ASX200 up 0.09% ahead of the close, while the Hang Seng managed to avoid red through the early part of the session, up 1.26%, following Thursday’s holiday. For the EUR, economic data scheduled for release this morning is limited to Germany’s industrial production figures for February, which are forecasted to be EUR positive, though with Germany’s manufacturing PMI having been on a downward trend through the 1st quarter and with factory orders having fallen by 3.5% in January, how strong the numbers will be remains to be seen. Outside of the data, the markets will continue to focus on Beijing and the Oval Office as the trade spat rages on, Trump’s latest move this morning suggesting that a trade war is just what the U.S is looking for, as Beijing goes to the WTO to look to address the tariff issue. A deterioration in market risk appetite will likely see an uptick in the EUR, with economic data unlikely to have a material impact should the noise continue through the European session.
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